As Bay Area economy booms, the rich get richer, study shows

Fast food workers and their supporters march in Berkeley on April 15, 2015, protesting for a higher minimum wage. The issue highlights how the gap between the very rich and everyone else is especially stark in the Bay Area.

Fast food workers and their supporters march in Berkeley on April...

While the Bay Area’s economy is booming, much of the wealth being created lands in the hands of the region’s richest residents, according to a recent report by the California Budget and Policy Center.

In 2013, the top 1 percent of income earners in San Francisco and the Peninsula made 44 times more than everyone else: about $3.6 million compared with $81,000 — the biggest disparity in the state, the study showed. The nonpartisan think tank also revealed that the region’s wealthiest residents saw a 220 percent increase in average income since 1989, compared with a 35 percent gain for the remainder of the population.

The numbers underscore a sentiment common in the Bay Area: While the economic tide is rising, it’s not lifting all boats proportionately, creating an increasingly large gap between the very wealthy and everyone else.

“I think of it like an economic ladder,” said Sarah Bohne, a research fellow at the Public Policy Institute of California, a statewide research group. “If inequality is growing, it means the rungs of the ladder are moving further apart, which makes it that much harder for people to jump to the next level.”

The Policy Center study, which used income tax data, is part of a growing body of research looking at extreme disparities between the small cadre of the very wealthy and the general population.

The trend isn’t unique to the Bay Area. In 1989, the top 1 percent commanded about 12.6 percent of all income in the United States, excluding capital gains. While still high, that ratio was much closer to those in other developed countries including Canada, Germany and Switzerland, according to the World Wealth and Income Database, a resource maintained by a consortium of global researchers, including French economist Thomas Piketty.

By 2014, nearly 18 percent of income in the United States was earned by the country’s wealthiest residents (21.4 percent when factoring in capital gains) — a rate that far surpassed those of many other developed nations. The same trend played out in California, where the top 1 percent captured most and, in some regions, all of the income gains made since 1989, according to the Policy Center’s report.

Dramatic rise

The rise was particularly dramatic in the Bay Area. In 1989, the top 1 percent of income earners in San Francisco and the Peninsula accounted for about 16 percent of the region’s total income. By 2013, that ratio nearly doubled, hitting 31 percent. The San Jose metropolitan area was the only part of the state that saw a larger proportional increase.

“We see widening income gaps across the board in California, but what’s dramatically different in the Bay Area is it’s almost entirely driven by significant increases in the concentration of wealth at the top,” said Chris Hoene, executive director of the California Budget and Policy Center in Sacramento. “What you want to see when you have that kind of economic growth is a much broader distribution of wealth.”

While the gap between the very rich and everyone else is stark in the Bay Area, its impacts are much debated. Some think such inequality is bad for economic and social well-being.

“Quality of life in California is not improving if we’re just dumping money on the top 1 percent,” said Clair Brown, a UC Berkeley economics professor, noting that income growth at the high end of the economic spectrum is typically spent on luxury items. “If income went up in the bottom 50 percent, that certainly would make those families better off, and make social welfare go up.”

Other experts believe that poverty rates and median income provide a more meaningful glimpse into the health of the economy. If the prior is falling and the latter rising, it’s a sign that business is good and people are enjoying a better quality of life — at least monetarily.

The most recent U.S. Census Bureau statistics present a mixed bag. While median household incomes increased by more than $15,000 in San Francisco between 2005 and 2014 — from roughly $70,000 to $85,100 after adjusting for inflation — poverty rates remained relatively unchanged, near 12 percent.

High or low pay

The discrepancy could boil down largely to employment opportunities. San Francisco and San Mateo counties added more than 220,000 jobs between December 2009 and December 2015, according to the most recent state Economic Development Department data. Nearly 1 in 5 of those jobs was in the high-paying computer systems and design sector. The low-paying service sector made up another large chunk of the growth.

Some experts think creating more middle-income jobs — or offering more training for the existing workforce to fill the highly-skilled positions — could be the key to ensuring a more inclusive economic growth. Inequity may just be a distraction, according to Micah Weinberg, president of the Bay Area Council’s Economic Institute.

“Inequality is a global phenomenon and it’s not clear that we here in the Bay Area can really make a dent in that,” he said. “What we can do is increase economic mobility in the Bay Area and create middle-skill, middle-wage jobs.”